2 Jul 2015
Nonfarm payrolls expected to see a 260K gain - ING
FXStreet (Barcelona) - Rob Carnell, Chief International Economist at ING, expects the US June nonfarm payrolls to see an above consensus gain at 260K, unemployment rate to nudge down to 5.3% and wages to pick up.
Key Quotes
“The consensus forecast for non-farm payrolls out today (a day earlier than normal) is for a rise of 230k. This is creeping higher. A week ago, it was 225k, but this is still fairly close to the 3-month moving average. And when you consider that this average contains some fairly soft earlier readings, it is not a particularly aggressive call.”
“The logic for the consensus is that last month’s 280k payrolls was a bounce, generated by the artificial softness of previous readings and pent-up labour demand. But in our view, it was more than just a bounce, and we look for the June payrolls result to lift the trend rate as a result. We don’t have as much supporting evidence from high frequency data as usual this month, due to the earlier than usual NFP release. But ADP is the most reliable survey (if still quite unreliable) for NFP, and its 237k increase from 203k in May, does suggest that the consensus is too low. Indeed, our own initial 250k forecast now looks a little hesitant, and we have nudged it up to 260k as a result.”
“The unemployment rate is, as ever, an independent result from the main payrolls series, and depends on the interactions between the stock / flow of unemployed but economically active and the labour force. The labour force did increase quite a lot last month, and after a spurt of about 400k may well slow down a bit this month. But this series is often also positively correlated with the change in the numbers of unemployed, which rose in May. Consequently, a smaller labour force increase will probably also mean a smaller or negative unemployment change, and an increased likelihood of a further fall in the unemployment rate. After last month’s increase to 5.5%, this could potentially take it down to 5.3% this time.”
“The most important part of the release, in our eyes, will be the wages component. In particular the hourly wages figure. Anecdotes of rising wages are becoming more commonplace, and consistent with the rising quits rate. Last month, the wages rate rose to 2.3% YoY, its highest rate since October 2009. Though we have been disappointed many times before, especially with downward revisions to the prior month’s data, we remain confident that we are close to a more concerted pick up in wages growth. If so, this will really give a boost to thoughts of a 3Q15 rate hike from the Fed, pushing up yields at the front end of the yield curve.”
Key Quotes
“The consensus forecast for non-farm payrolls out today (a day earlier than normal) is for a rise of 230k. This is creeping higher. A week ago, it was 225k, but this is still fairly close to the 3-month moving average. And when you consider that this average contains some fairly soft earlier readings, it is not a particularly aggressive call.”
“The logic for the consensus is that last month’s 280k payrolls was a bounce, generated by the artificial softness of previous readings and pent-up labour demand. But in our view, it was more than just a bounce, and we look for the June payrolls result to lift the trend rate as a result. We don’t have as much supporting evidence from high frequency data as usual this month, due to the earlier than usual NFP release. But ADP is the most reliable survey (if still quite unreliable) for NFP, and its 237k increase from 203k in May, does suggest that the consensus is too low. Indeed, our own initial 250k forecast now looks a little hesitant, and we have nudged it up to 260k as a result.”
“The unemployment rate is, as ever, an independent result from the main payrolls series, and depends on the interactions between the stock / flow of unemployed but economically active and the labour force. The labour force did increase quite a lot last month, and after a spurt of about 400k may well slow down a bit this month. But this series is often also positively correlated with the change in the numbers of unemployed, which rose in May. Consequently, a smaller labour force increase will probably also mean a smaller or negative unemployment change, and an increased likelihood of a further fall in the unemployment rate. After last month’s increase to 5.5%, this could potentially take it down to 5.3% this time.”
“The most important part of the release, in our eyes, will be the wages component. In particular the hourly wages figure. Anecdotes of rising wages are becoming more commonplace, and consistent with the rising quits rate. Last month, the wages rate rose to 2.3% YoY, its highest rate since October 2009. Though we have been disappointed many times before, especially with downward revisions to the prior month’s data, we remain confident that we are close to a more concerted pick up in wages growth. If so, this will really give a boost to thoughts of a 3Q15 rate hike from the Fed, pushing up yields at the front end of the yield curve.”